Guilty plea expected in Broadcom options
A former Broadcom Corp. executive has agreed to plead guilty to obstruction of justice in connection with a federal probe into the manipulation of stock option grants at the Irvine chip maker, people close to the investigation said Monday.
As part of the deal, former Broadcom human-relations chief Nancy Tullos has agreed to cooperate with investigators examining allegations that top Broadcom executives backdated stock options to secretly benefit employees, according to three people with knowledge of the probe.
Tullos’ attorneys declined to comment. Tullos, 56, who has homes in Malibu and Dana Point, has declined requests to be interviewed.
The plea agreement could come as early as this week, according to the people close to the case. They spoke on condition of anonymity because the agreement hasn’t yet been filed.
In January, Broadcom reduced previous financial results by $2.2 billion. That was the largest accounting correction among the approximately 200 corporations the Securities and Exchange Commission has said it investigated for allegedly misdating stock option grants to make them more valuable.
Options are the right to buy shares at a set price in the future.
The Broadcom case is significant not only because of the $2.2-billion adjustment but because of the prominence of the firm’s founders, Orange County billionaires Henry Samueli and Henry T. Nicholas III.
Samueli, Broadcom’s chairman, owns the Anaheim Ducks hockey team and has become one of Southern California’s biggest philanthropists. His attorneys have declined to comment on the investigation.
Nicholas, a major philanthropist as well, left Broadcom in 2003. Last year, his former administrative assistant Kenji Kato filed a lawsuit in Los Angeles County Superior Court alleging that Nicholas required him to oversee supplies of cocaine and other drugs, pay prostitutes from a “petty cash” fund and conceal these activities from his wife and others.
Nicholas’ lawyer called the allegations “crazy” and contended that the civil suit was a $9-million extortion scheme. The charges have been sent to arbitration proceedings, which have yet to conclude.
Robert Gunther, the former chief operating officer for Nicholas’ holding company, pleaded not guilty last week to a felony charge of money laundering. The charge grew out of the federal Broadcom investigation.
Court documents filed in the Gunther case show that other former aides have become cooperating witnesses in the investigation.
A veteran human-relations executive, Tullos worked for CyberMedia Inc., Micropolis Corp. and Western Digital Corp. before joining Broadcom in September 1998.
She left the company in October 2004 and later served a stint at QLogic Corp.
Broadcom disclosed last summer that the company, Samueli and Broadcom General Counsel David Dull have been put on notice by the SEC that the agency intended to sue them for allegedly backdating options.
The SEC’s so-called Wells notices give companies and individuals a chance to respond before lawsuits are filed. Defense attorneys said they would respond to the SEC and no suit had yet emerged.
The company previously said in an SEC filing that its internal investigation had implicated Tullos, Nicholas and former Chief Financial Officer William Ruehle in the mishandling of options.
In that filing, Broadcom exonerated Samueli in the options backdating allegations but found “substantial evidence that Dr. Nicholas was at times involved with the selection of grant dates after the fact.”
Nicholas’ attorney, John W. Spiegel, previously acknowledged that some stock option grants should have been accounted for differently but said the company’s investigation showed Nicholas “did not knowingly engage in selecting grant dates after the fact.”
He could not be reached for comment Monday.
--
